Product: Sneakers

Assignment You are going to do an an analysis of that product and nd out the: - elasticity of demand. a Number of Substitutes 0 Luxury versus Necessity 0 Income o Time Lag - income elasticity, and . cross price elasticity analysis of that product. In-N-Out 1. Number of Substitutes There are many substitutes to In-N-Out. There are many fast food restaurants that sells burgers fries, and similar drinks, like; McDonalds Carls Jr, Jack in the box, among others. However, I prefer the taste of the In-N-Out Burgers than the other fast food restaurants so for me is inelastic but because of the high number of substitutes, consumers may shift their consumption for one of the substitutes making In-N-Out elastic. 2. Necessities versus Luxuries In-N-Out can be classied as a Luxury item because is not a necessity for me and I can do without buying In-N-Out. This means it's elastic. 3. Percentage of one's budget spent on the goods I don't eat ln-N-Out that often, so I'd say ln-N-Out doesn't take a huge percentage of my budget. The combo that I usually buy when I eat there is only $7.65, sol don't consider it a big expense. This make it inelastic for me. However, this can also be elastic depending on the income of each person. 4. Time lag It's not hard to nd a substitute for ln-N-Out and sometimes I don't have time to wait in the long lines to buy In-N Out, 50 many times I decide to nd a substitute to eat without wasting so much time. This means that it is elastic. Elasticity of Demand: I would conclude that for me, the demand for ln-N-Out is elastic, because it is not a necessity or product that is important or essential for me to buy. Although it doesn't cover a large place in my budget, it's not an expense that I would necessarily make. Income Elasticity Ie = % Change in Demand I % Change in Income Lets suppose that In-N-Out estimates that when income of its customers falls from $60,000 to $40,000, the demand for its widgets falls from 5,000 to 3,000 burgers sold. % Change in Demand : 3.0006000 / 1/2 (3,000+5,000) : -0.5 % Change in Income : 40,000 - 60,000 / 1/2 (40,000+60,000) = -0.4 Income Elasticity= -O.5/-0.4 = 1.25 Income Elasticity is >1. this means that quantity demanded and income are directly related. This is a normal good and it is income elastic Cross Price Elasticity: % change in demand of product A / % change of price of product B Product A: In-N-Out Product B: McDonalds Lets suppose that the price of a cheeseburger in McDonalds decrease from $8 to $6 and the number of cheeseburgers bought in In-N-Out went from 30 to 20. % change in demand of product A= 30-20 / 1/2 (30+20) = 0.4 % change of price of product B = 8-6/1/2(8+6)= 0.3 Cross Price Elasticity = 0.4 / O.3= 1.3 Cross Price Elasticity is >0, this means that quantity demanded and price are directly related. The two goods are substitutes